The Role of Directors

Individuals involved in companies may hold various roles.  In some cases, the same individual will hold all of the roles while, in others, different parties will be involved.  Over the next few articles, we will cover various roles including directors, officers and shareholders. 

The powers vested in the board of directors, which will be the subject of this article, are found through a combination of the company’s articles, shareholders’ agreements, the governing legislation and common law (or judge made law).  Directors are either elected or appointed to the board of directors. Individuals that are not formally appointed as directors should be cautious not to take on responsibility and undertake actions that would be those of the board as it can result in the placement of certain obligations and responsibilities typically reserved by directors on that individual.

The board of directors of a company is typically tasked with the management and supervision of the affairs of the company which authority is generally free from interference by the shareholders (the owners of the company).  While there are situations where extensive authority can be granted to another party, this is not a common occurrence in the typical companies we deal with in British Columbia.  The power that the shareholders would hold in most situations, if they are not satisfied with the way the board is managing the company’s affairs, would be to change the board of directors at the next meeting or possibly remove one or more directors by a resolution or other method in advance of a meeting.

In performing the role of a director, a person is required to act honestly, in good faith and in a view to the best interests of the company.  A director must also exercise the care, diligence, and skill that would be exercised by a reasonably prudent person in similar circumstances.  As a director has fiduciary obligations, failing to meet their obligations can lead to potential liability for a director of a company and, accordingly, the role should not be taken on lightly.

Directors also take on liability in the course of performing their role and so it is important that someone engaged in such a position is actively involved in the organization and participates in directors’ meetings. While there are some protections found for directors through judge made law as well as insurance policies that can be obtained, the role is a significant one that should be acted on as such both for the benefit of the company and also for the protection of the director. 

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of corporate law at the following:

Jane Otterstrom: jane@touchstone.law

Una Kuzio: una@touchstone.law